The tech industry is in turmoil. Layoffs happen in thousands and this is being written. But even in this financial climate, IBM wants to buy Sun Microsystems for $6.5 billion – in cash! If this deal is done – it could shake up the whole of tech industry specially the Silicon Valley.

Why buy Sun?

And the reasons for IBM to keep an eye out on Sun are not few. Sun has positioned itself as a strategic player in the tech for more than 20 years. Sun developed Java, one of the most important programming languages for Internet. It also has Solaris tucked under its belt. Sun is also a strong contender in the server markets which could place IBM at a very lucrative position if the IBM-Sun deal gets somewhere. Sun also bought MySQL, the most popular open-source database for about $1 billion last year.

While Sun is good at developing and improving products, it is slow at promoting its products. On the other hand IBM has vast sales network and has deep roots in corporate computing where it can place its offering more attractively. And when banks are bailing what better thing to do than throw a $6.5 billion out of its unused $13 billion? Good investment and a bargain if you ask – even after paying a 100% premium to Sun. Sun has also been the company that helped the rise Web 2.0 and gove

Stock Market Reacts

The Wall Streets reaction to this deal has been somewhat mixed. While Sun’s share rose 61 percent [$3.05] to $8.02, IBM shares plummeted about 2.5% [$2.46] to $90.45.

Why is it a good deal for IBM?

Sun’s products have become insustry standards and this gives IBM an edge over its competitors [read Microsoft]. Sun offers a free and open-source OS Solaris and also Star Office, Sun’s version of OpenOffice.org – a free, open-source alternative to Microsoft Office. And Sun announced its Cloud Computing strategy that’d be a competing service to Amazon Web Services! The paradigm shift to cloud computing could sweeten the deal even more for IBM. If the dealmakes its way it’ll be the biggest acquisition of IBM – to date.

Get in line!

While IBM will try its best to buy Sun there are other competitors that may ruin IBM’s plans. The competitors include HP, Dell and Cisco. Microsoft doesn’t count as buying Sun would mean axing their own products in favor of open products.

Lets see where the deal goes! Subscribe by RSS or email ?[top-right of the page] so that you don’t miss a post!